SUBJECT

PARTICIPANTS

Foreign:

Sunthorn Hongladarom, Thai
Ambassador to the U.S.

United States:

U. Alexis Johnson, Under
Secretary for Political Affairs

John B. Dexter, Country
Director, Thailand/Burma

The Under Secretary asked the Ambassador what he saw as his most
important problems as Ambassador in Washington. Sunthorn immediately
responded that his most important concern was that the United States
Government maintain economic assistance at past levels. Past assistance
had been successful, he said, but Thailand’s economic outlook was such
that continuation of substantial assistance was desirable. He pointed
out that the trade balance was adverse, primarily because of declining
rice exports, and noted that the World Bank had reported that this year
for the first time Thailand would suffer a balance of payments deficit.
The decline in exports is a major factor [Page 69]and another is increasing domestic expenditures for
development purposes, especially the accelerated rural development
program (ARD) which has been
sufficiently successful to justify increasing allocation of Thai
resources.

The Under Secretary asked how U.S. economic assistance compared in
magnitude with U.S. military expenditures in Thailand. The Ambassador
could not give statistics but said military expenditures were
considerably larger. He added that, while U.S. assistance has been
substantial, U.S. exports to Thailand have also been increasing. In
response to a question by the Under Secretary the Ambassador indicated
there was also a growing trade deficit with Japan.

There followed a discussion of Thailand’s efforts to diversify its
agricultural production and exports through development of corn, millet,
tapioca, cassava, etc. The Ambassador said there was little expansion of
exports of manufactured goods, the development of manufacturing thus far
serving primarily for import substitution (with the exception of
cement).

Ambassador Sunthorn then reiterated
that the main problem was rice and commented that our Department of
Agriculture was familiar with RTG
complaints about PL–480 sales in the
area and exports of U.S. rice to Hong Kong, an important traditional
Thai market. The Under Secretary said one of the problems affecting
decisions on U.S. aid to Thailand was Thailand’s high level of foreign
exchange reserves. Some argue that this means Thailand does not need
foreign assistance. On the other hand, one could question whether the
Thai should be “penalized” for the good management which resulted in
accumulation of reserves. In any case, the high reserve level was a
problem when we tried to justify aid to Thailand on the Hill.

The Ambassador explained that the RTG had
to maintain substantial reserves because it needs flexibility in the
event of contingencies such as drought, floods, etc. which might
suddenly reduce exports and require rapid drawdown of reserves. He added
that Thai reserves will probably be down this year about $30 million and
this trend is expected to continue for the next few years. This is one
reason the RTG hopes U.S. economic
assistance will remain at a high level. Under Secretary
Johnson responded that it was nevertheless
desirable to look toward a termination of all foreign assistance to
Thailand as soon as possible, as had occurred with Taiwan. Thailand, he
said, is a “success story” and it is healthy for both sides in the
circumstances to anticipate an end to aid and to placing relations on an
equal footing. The Ambassador agreed but argued that timing is
important.

Source: National Archives, RG 59, Central Files 1967–69, POL 17 THAI–US.
Confidential. Drafted by Dexter, approved by Green, and approved in J on December 1. The
memorandum is part 2 of 3; part 3 is ibid; part 1 is Document 30.↩